FINANCIAL IQ TEST: How Healthy Is Your Budget?

Budgeting is one of the hardest things for any of us to do well — and stick to. It requires discipline, attention to detail, and persistence. But it doesn’t have to be impossible; and effective budgeting can actually be quite empowering.

Following is a Financial IQ Test to help you determine how healthy your budget is. Simply look at each statement, and answer it with a YES, NO, or NOT SURE. Keep track of your answers, and we'll see how you score at the end. Then, check out the resource articles below to increase your knowledge base.

Budget Maintenance

I plan ahead for large expenses like repairs, appliances, or periodic bills.

I amortize annual expenses over 12 months for budgeting purposes (I apply the same principle to other periodic expenses too, for example quarterly expenses are amortized over 3 months).

I record all my expenses (or have an accurate record of expenses through bank statements or the like).

Before I created my budget, I monitored my expenses over a few months to figure out what I spend.

I review my budget regularly for effectiveness and modify as needed.

Savings

My savings plan is an expense that is part of my budget.

Extra money like pay raises, bonuses, and tax refunds go directly into savings or to pay off debt.

Gifts and charitable donations are part of my budget.

Flexibility

If I anticipate that I’ll go over the budget in one category, I find the money from another category that month.

I have financial padding built into my budget for flexibility (and sanity).

Accountability

I don’t charge anything to my credit card unless I can pay it off in full by the due date.

I pay all my bills on time.

My income is larger than my expenses.

Budget Lifestyle

I don’t allow myself to feel pressured by peers to spend money that I don’t have.

I don’t buy caviar (for example) unless it’s in the budget – even if it is on sale for half price.

I view my budget as a way to figure out what I CAN afford, instead of what I CAN’T.

I have a positive goal or vision to keep in mind (like being debt-free, or having a vacation) for times when the budget is tight or I start to feel deprived.

I budget for small rewards to keep me on track and motivated.

Everybody in the family participates in the budgeting process.

Scoring

Did you keep track of how many times you answered YES, NO, and NOT SURE? Great! Give yourself the following points for each answer:

YES = 4 points

NO = 0 points

NOT SURE = 2 points

Analysis

Score: 0-35 – More Budgeting Required

If you have a budget at all, you’d probably agree that it’s not particularly effective. You might manage your expenses on the fly each month, and although it may work for now, there may come a time when some unexpected expenses will railroad you – or you may simply not realize that you could do more with the money you have. A little more attention to what you spend could be enlightening.

Score: 36-70 — Getting There

You probably make an attempt to budget, but it’s not quite effective, and you may not even realize why or where you’re going wrong. Don’t be too hard on yourself; budgeting requires a lot of discipline, tenacity, and attention to detail. This isn’t easy for everybody. Check out some of the resources below to improve your technique.

Score: 71-100 – Budget Master

Although there’s always room for improvement, you’ve got a system that largely works for you. Take a look at the questions you answered “not sure” or “no” to, and see where you can improve. But for the most part give yourself a pat on the back – you are in the minority of people who have – and stick to – an effective budget. Congratulations!

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Beth #1

Thanks! I'm doing well for the moment, but this test helped me find a few gaps in my budgeting process.

I handle my budgeting a lot different. I am definitely a non rules person. What I do is transfer the amount I can spend into a checking account and then use my debit card for everything. I have different accounts that all help with the budget.

- The savings account automatically gets the savings amount transfered to it on payday, same with the charity account and the tax account

- The utilities account automatically gets the amount for the month (including the saving up things) on payday,

- The hubbies account gets 100 a month for his spend money

- The main account is the mortgage and checking account. It is rarely used except for the mortgage coming out of it and a few checks a month

Everything is as smooth as silk except my hubby doesn't get paid a regular amount. It messes everything up. We try and put all his money into savings or into a major purchase fund.

And @Connie - if your system works for you, then it's a good one. Using separate bank accounts to compartmentalize your spending needs is viable - as long as you don't pay a monthly fee for each of the accounts, and as long as you stay on top of bank balances and don't go into overdraft on any of them.

To properly budget your personal finances you simply add up your sources of income, account for every penny that you have flowing to you each month, and track every expense. I am not concerned with the exact system you employ as long as you are detailed and know how your money is flowing. Track your loans, and if you have bad credit lenders, know how much you are spending in interest.